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What are the employment law implications of the UK leaving the EU?

Honouring their manifesto commitment, the Conservative government called an "in-out" EU Referendum on Thursday 23 June 2016, and after more than 40 years the UK will no longer be part of the European Union. At the time of writing David Cameron has confirmed he will stand down as prime minister and Jeremy Corbyn is desperately trying to hang on to his leadership of the Labour party. But apart from political melt down, what does this mean for employment law in the UK?

Many areas of UK employment law are a direct result of EU law. For example, the current law on maternity and paternity leave, TUPE transfers, discrimination and paid holidays all emanate from Europe. On the face of it, departure from the EU could have a significant effect on UK employment law.

There are, however, a number of uncertainties in terms of the manner in which ‘Brexit’ will take place, what agreed ongoing relationship (if any) will replace Union membership and how courts in the UK will deal with established European jurisprudence going forward. Change will not occur overnight. We have already entered a period of uncertainty and this may be followed by piecemeal reform of the current law. However, that piecemeal reform will need to take place within the constraints of any newly-negotiated relationship with Europe, which may well retain some control over employment law.

The first consideration is the effect that an exit from the EU has upon the legislation enacted as a result of membership. The framework of European employment law has been incorporated into UK employment law in a number of ways. In some cases "primary legislation" has been enacted by Parliament in order to give effect to obligations agreed at European level. An example of this is the Equality Act 2010, which has its roots in the EU’s Equal Treatment Directive. Primary legislation such as this can remain in force notwithstanding the fact that it was originally enacted to give effect to EU law. In the short term at least, there need not be any impact upon primary legislation.

However, other pieces of employment legislation have been enacted as "secondary legislation". Secondary legislation is passed by a Government minister under the powers granted to him or her by a piece of primary legislation which, in this context, is the European Communities Act 1972. The 1972 Act is the legislation enacted in order to incorporate EU law into domestic law.

Give the UK is exiting the EU then Parliament is likely to repeal the 1972 Act. One effect of this is that the piece of primary legislation supporting the introduction of the secondary legislation would disappear. This potentially means that all of the Regulations passed under the powers granted by the 1972 Act will cease to have effect as there will be no ‘enabling’ primary legislation underpinning them. The Transfer of Undertakings (Protection of Employment) Regulations 2006 and the Working Time Regulations 1998 are examples of secondary legislation which could cease to have effect.

The second consideration is what, if anything, will replace the EU. The UK could remain in the European Economic Area (EEA) and the European Free Trade Area (EFTA) – the course adopted by Norway. However, this would mean that it would be obliged to accept the majority of EU legislation without having any input/veto rights. Consequently, such an outcome might limit the effect of a Brexit upon UK employment law.

The UK could, like Switzerland, also remain in the EFTA but not as a member of the EU or EEA, but that would still mean that it would have to accept certain EU rules via bilateral agreements on a sector-by-sector basis.

The most dramatic change would be if the UK were to sever all ties to Europe, in which case the government would have free rein to alter employment law rights.

Upon a complete exit from Europe, the Government could decide to repeal, revise or maintain the current primary legislation. Repealing all of the legislation enacted as a result of EU membership would be a huge task and could not happen overnight. It would also cause huge upheaval and confusion for businesses as well as for the markets which the Government would be keen to avoid. It is much more likely that the Government would revise the current legislation piece by piece, starting with areas of particular concern. It may be that employment law would not be regarded as a high priority politically, meaning that, from a legislative perspective at least, there would be little change in the foreseeable future.

Yet the fact that there may not be significant changes in legislation until some time after Brexit does not mean the interpretation of employment law by our courts would be unaffected. Upon a complete exit from the EU, the UK would no longer be bound by the decisions of the Court of Justice of the European Union (ECJ). However, when ruling on the interpretation of any legislation originally enacted due to membership of the EU it is likely that, particularly in the short-term, the domestic courts would still treat any ECJ decisions as persuasive, although not binding. Whether courts and tribunals will continue to regard themselves as bound by the precedents of higher courts, where those precedents were grounded in ECJ jurisprudence will be another interesting aspect of Brexit.

Most employers have drafted their contracts of employment and policies with the rights incorporated into UK law by virtue of EU membership in mind. Even if the relevant legislation were amended or repealed, employees might still have a contractual right to rely on such rights emanating from their contracts.

It seems relatively unlikely that the UK will cut all ties with Europe given the generally-accepted need for some form of free trade agreement. As such, it is unlikely that the EU and the decisions of the ECJ will cease to affect UK employment law for the foreseeable future.

Disclaimer

The content of this webpage is for information only and is not intended to be construed as legal advice and should not be treated as a substitute for specific advice. Morton Fraser LLP accepts no responsibility for the content of any third party website to which this webpage refers. Morton Fraser LLP is authorised and regulated by the Financial Conduct Authority.

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